The Delhi HC passed a judgement on 28th February, 2023. This was seen in the case of Mahanagar Telephone Nigam Limited v. Canara Bank and anr. 2023/DHC/001430 and the case was presided over by Hon’ble Justice Prateek Jalan
FACTS OF THE CASE:
The case has its genesis in CanFina’s subscription of ₹200 crores worth of bonds floated by MTNL in 1992. As per an agreement between the two parties, CanFina was to invest a part of the subscription amount in itself.owever, the 1992 securities scam and the subsequent collapse of the securities market were later blamed for disrupting the proposed transactions.
Amid disagreements between the two over payment obligations, MTNL cancelled the letters of allotment in 1993. The dispute reached the Delhi High Court in 1995, and was referred to arbitration in 2011.
The Delhi High Court recently stayed an arbitral award ordering Mahanagar Telephone Nigam Limited (MTNL) to refund ₹ 160 crores along with interest to CanBank Financial Services Limited (CanFina), subject to the condition that MTNL deposit security covering the entire refund amount, which effectively runs to around ₹ 442.69 crores, in a Fixed Deposit.
“Having heard learned Senior Counsel for the parties, I am not persuaded that MTNL is entitled to an unconditional stay of the award. MTNL has not been able to demonstrate prima facie that the contract which is the basis of the award, was induced by fraud or corruption. Certain observations have undoubtedly been made in the committee reports relied upon by MTNL, which support its allegation of irregularities in CanFina’s transaction at the relevant time. However, the contemporaneous correspondence does not establish a case of fraud or that MTNL was not aware of the nature of the transactions. The learned arbitrator drew upon some of this correspondence to arrive at a conclusion that the transactions were not vitiated by fraud 15 , and I see no reason to disagree, at least at this stage of proceedings”, the Court said.
The directions issued by the Court are as follows:
• MTNL is to deposit with the learned Registrar General of the High Court, an amount of ₹160 crores and interest at 6% per annum from October 20, 1993 until March 31, 2023. The deposit is to be made by April 15, 2023.
• The amount deposited is to be kept in fixed deposit, initially for one year, and extended from time to time during the pendency of the petition under Section 34 of the Act.
• MTNL is further directed to deposit further interest accrued in terms of the award every six months thereafter. The first supplementary deposit will cover the interest liability under the award for the period from April 1, 2023 to September 30, 2023, and must be made by October 15, 2023. Subsequent deposits are to be made by April 15 and October 15 of each succeeding year.
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Judgement reviewed by Drishti verma